Mrs Merkel had provided "steadfast moral leadership in a world where it is in short supply", editor Nancy Gibbs wrote.

Islamic State leader Abu Bakr al-Baghdadi was named runner-up and third place went to US presidential hopeful Donald Trump.

Eclectic list

Ms Gibbs wrote of Mrs Merkel: "For asking more of her country than most politicians would dare, for standing firm against tyranny as well as expedience and for providing steadfast moral leadership in a world where it is in short supply, Angela Merkel is 'Time's Person of the Year'."

Citing the refugee and Greek economic crises, along with the Paris terror attacks, Ms Gibbs said: "Each time Merkel stepped in. Germany would bail Greece out, on her strict terms. It would welcome refugees as casualties of radical Islamist savagery, not carriers of it.

Time Person of the Year 2015

Angela Merkel - German chancellor since the 2005 election, leader of the CDU

"And it would deploy troops abroad in the fight against ISIS [Islamic State]. You can agree with her or not, but she is not taking the easy road. Leaders are tested only when people don't want to follow."

The magazine also noted her leadership during what it called Russian President Vladimir Putin's "creeping theft of Ukraine".

Mrs Merkel's spokesman, Steffen Seibert, said: "I am sure the chancellor will cherish this as an incentive in her job."

After the award was announced Donald Trump tweeted: "I told you @TIME Magazine would never pick me as person of the year despite being the big favorite They picked person who is ruining Germany."

Media captionWhy Angela Merkel was named "Person of the Year"

While Time runs a poll for readers to vote, the decision on winners is made independently by the editors.